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Why It Makes Sense To Eliminate Ed Award Taxation

After using the Ed Award, many alumni are hit with an unexpected federal tax obligation that, on average, runs in the hundreds of dollars.For example, an AmeriCorps alum who wants to use his or her Ed Award to pay off student loans but works at a low-paying non-profit, as many alums do, is typically obligated to pay several hundreds of dollars in out-of-pocket taxes.Because taxes are not deducted beforehand, this burden can be overwhelming.There are several sound reasons why it makes sense to eliminate taxation of the Ed Award, all of which are detailed below.

1. TAXATION OF THE ED AWARD IS NOT IN LINE WITH SIMILAR FEDERAL EDUCATIONAL AWARDS

Since 1993, the cost to attend institutions of higher learning has more than doubled (noteTable 5 to the left). During this same time, the Ed Award has never received an increase.Eliminating taxation on the Education Award would help to supplement Congressional efforts to make college more affordable for AmeriCorps alumni across the country, while at the same time signal Congressional support for national and community service.

3. DECLINING PURCHASING POWER OF THE EDUCATION AWARD DUE TO INFLATION

The National Service and Community Trust Act of 1993 set the education award benefit for AmeriCorps service at $4,725.This was a compromise value that reflected an amount equal to approximately 90% of the scholarship given to military veterans. The award amount has not changed during AmeriCorps’ 15 year existence, despite inflation and increases in college tuition costs.Please refer to Table 3 above to note the steady decrease in the value of Ed Award.The table displays the value in constant 1993 dollars.

4. TAXATION IS COUNTER TO ITS INTENT

As part of the National Service and Community Trust Act of 1993, the Ed Award was enacted into law as a way to invest in the education of those U.S. residents who served their country in a domestic capacity.Because its taxation has the effect of reducing the amount education that can be accessed through its usage, taxation of the Ed Award seems counter to its intent.Eliminating its taxation would send a signal that reaffirms Congressional support for those individuals who serve their country in a domestic capacity while at the same time promoting the value of national and community service to our country.

5. ELIMINATING TAXATION MAY INCREASE UTILIZATION OF THE ED AWARD

While there is no scientific study to verify the validity of this claim, it is also possible that more alumni would utilize their Ed Award if they knew they would not be taxed during tax season.This would not only pump more funding into institutions of higher learning, it would allow for the education of more AmeriCorps alums, better equipping them for success in the workforce.